Oil Giants Need To Think Beyond Profits

PARIS, Apr 6 2011 (IPS) - The uprisings in the Middle East and North Africa have shaken the petroleum industry, triggering oil price hikes and forcing the sector to go on the defensive. But critics say the industry carries some of the blame for the current crisis. “When you’ve been in bed with these dictators, dining with them and making them rich, you have to take some responsibility,” said Nigerian businessman Ahmed Lukman. “You just cannot sit down and be passive any more.”

Speaking on the sidelines of the 12th International Oil Summit here Wednesday, Lukman told IPS that many people in developing countries perceive oil companies as being in cahoots with corrupt governments.

“When things get out of control, everybody says ‘it’s not us’, it is the government’s fault,” Lukman added. “But oil companies have to start doing something. The people who have been waiting are not going to wait anymore.”

Lukman, the son of Nigeria’s former minister of petroleum resources, Rilwanu Lukman — an official speaker at the summit — said that the profits from oil “need to go in services, healthcare, education” and other areas to benefit local populations.

“Somebody has to bridge the gap instead of focusing on the millions of dollars that are to be made,” he told IPS. “I’ve been on both sides so I know what the stakes are.”

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The annual Oil Summit brings together industry leaders and government officials to exchange information and discuss challenges, but this year the series of “revolutions” that began in Tunisia have sharpened the conference’s focus.

Meanwhile, Japan’s nuclear troubles, after last month’s earthquake and tsunami, have put the spotlight on that sector as well. The consequences of the Deepwater Horizon oil spill in the Gulf of Mexico are also still being analysed.

Algeria’s former energy minister Nordine Ait-Laoussine, who opened the one-day meeting, said that the result of the regional upheavals will have dramatic ramifications for energy markets in the long term.

In the short term, oil prices on Monday rose to their highest level in two and a half years, with Brent North Sea crude for May reaching 121.29 U.S. dollar, before slipping back Tuesday. In Libya, meanwhile, the production capacity of 1.6 million barrels a day remains shut as the conflict between rebels and the government continues.

Oil companies are seeking ways to minimise the impact. Christophe de Margerie, the summit’s keynote speaker and chief executive of French oil giant Total, said his company was investing 5 billion euros (about 7 billion dollar) in new energies by 2020, with priorities being solar energy and biomass.

“We have a serious commitment for these new energies,” he said. He told journalists that Total was also looking at new oil and gas reserves, and that the company would restart operations in Libya as soon as possible. He said that Total has no defined relationship with the rebels’ interim national council in Bengasi.

De Margery acknowledged that there is a “crisis of trust” in the energy industry. “It is not only nuclear that isn’t trusted, but energy as a whole,” he said. “We have to reinstate trust.”

He defended oil industry’s measures to heighten transparency, however, stating that “we’re one of the most transparent industries in the world”, but with room for improvement. He said that the public should not consider national oil companies as “enemies” but as “potential partners”.

The Total chief said that the most important part of the debate was how to reduce the demand for oil.

“We need to reduce consumption in all countries,” he told journalists, without being specific. The United States is the world’s biggest consumer of petroleum products, but countries such as China and India are also seeing a huge growth in consumption.

According to industry experts, energy consumption in the developing world will increase by 65 percent in 25 years. In addition, the world’s population is expected to rise to nine billion by 2050, further spurring demand for energy.

“We could enter a zone of misery or a zone of opportunity,” said Mark Williams, the downstream director of Anglo-Dutch company Shell, who also spoke at the summit, stressing the “economic and social benefits” of oil.

But for some people, oil extraction has already resulted in misery, in areas such as the Niger Delta. A report published late last year by environment group Friends of the Earth said that Shell is still violating international environmental standards on a large scale in the Niger Delta, resulting in 250 oil leakages every year.

“The truth is that the oil companies and the governors are locked in unholy matrimony,” says Nnimmo Bassey, Friends of the Earth International chair and executive director of Friends of the Earth Nigeria.

“To say that the sector is transparent is being more than economical with the truth,” Bassey told IPS in response to questions about the summit. “They brag about ‘publishing what they pay’ but that is one tiny bit of transparency. In Nigeria the so-called transparent oil companies have refused to say how much crude oil they actually extract from their oil wells. If this is not opacity, then I cannot define the word.”

Bassey, who was a recipient of the 2010 Right Livelihood Award (often referred to as the Alternative Nobel Prize), added that “oil companies are currently struggling against new transparency rules about to be in effect by the U.S. Stock Exchange Commission because they don’t want to declare payments made to certain governments.”